Limits of ESG Investing: Challenges from Supply Chains (WITHDRAWN).

Coupling is an institutional mechanism describing how symbolic adoption leads to alignment with intended outcomes. However, prior literature does not adequately consider organizational plasticity which can help create an impression of coupling, without achieving it. Extending institutional research, we uncover a novel mechanism termed "spurious coupling" in which a spurious correlation between symbolic policy and intended outcome is established. We develop a theoretical framework to account for spurious coupling and find empirical support in the context of environmental, social, and governance (ESG) investing. Using investors' signatory status of Principles for Responsible Investment (PRI) as a proxy for the institutional demands of ESG, we find strong evidence that ESG ownership of a corporation reduces the environmental performance of suppliers. The effect is stronger when the ESG investors as agents of private governance are weak in overseeing organizational plasticity. The effect is weaker when public governance of organizational plasticity is higher, such as when focal corporation is in a civil law country, rather than in a common law country. We contribute to research on institutional theory, ESG investment, and pollution outsourcing. [ABSTRACT FROM AUTHOR]